Temporary Guardianships: Perfect when they fit, Trouble when they don’t

July 6, 2010 by fordmath

In the past, this blog has identified many of the traditional elements of a guardianship matter, and has outlined many of the alternatives available under certain circumstances. Often, neither the traditional approach or the alternatives are a good fit. The situation might demand that action be taken quickly, particularly if the Proposed Ward and/or her property are at immediate risk.

Temporary guardianships and their procedural elements are frequently misunderstood, by clients and courts alike. In many cases, they are sought for the wrong reasons, or without adequate information, and they can sometimes do more harm than good. Today, temporary guardianships work very much like permanent guardianships. Their cornerstone differences are (a) a fast-tracked process, and (b) a temporary fix to what might be a permanent issue.

Under prior legislation, a temporary guardianship could be granted without notice to the Proposed Ward. I am consistently astonished by the continuing perception that this kind of procedure is still available in Texas. It is not. Many clients, attorneys and even judges apply the outdated procedure when they seek or grant an ex parte temporary guardianship, or one created before the Proposed Ward is ever even notified.

Today, the Probate Code is clear on the notice provisions of every temporary guardianship. When an application is filed, an attorney is appointed to represent the Proposed Ward. The Clerk issues specific notices and provides a copy of the application to every concerned party, including the appointed attorney. The Court sets a hearing date, generally within 10 days. If these steps are not followed, the Court cannot create a temporary guardianship. If it does, buckle up for the bumpy ride.

Temporary guardianships can be a wonderful tool when used appropriately. In a time when a hearing on a permanent guardianship might take weeks to coordinate, temporary guardianships get the ball rolling much faster. In true emergency situations, they can safeguard the Proposed Ward from imminent harm and even temporarily lock down the Proposed Ward’s estate if it is at risk. Used correctly, temporary guardianships can be true lifesavers. Sought for the wrong reasons, or created under repealed and rewritten laws, temporary guardianships can cause more trouble than they fix.

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LegalZoom Faces Class Action Suit

June 25, 2010 by fordmath

Somebody once said that there is no such thing as bad publicity. In a nutshell, bad news is still good publicity, so long as they spell your name correctly. LegalZoom.com is back in the news again, and the company might disagree with the age-old marketing adage right now.

For those not familiar with the self-appointed titan of online lawyering, LegalZoom was founded in part by Robert Shapiro, who you should remember was a leading element of O.J. Simpson’s legal team several years ago. The company provides a litany of online legal services and boasts the ability to serve individuals who might otherwise not be able to afford the expense of an actual attorney. For the most part, the nine-year-old company’s services seem centered on a do-it-yourself approach, specializing in providing what are claimed to be “common” or “routine” documents – things like Wills and documents to form a business.

Now, the company is playing defense. A recent class action lawsuit has accused LegalZoom of unfair and deceptive business practices. The company is accused of leading customers to practice law without a license, assisting in the unauthorized practice of law, and using fraudulent business practices.

The chief plaintiff, Katherine Webster, has sued as the Executor of the Estate of Anthony Ferrantino, and as Trustee of the Anthony J. Ferrantino Living Trust. LegalZoom provided several document forms, including a trust, a will and a power of attorney. Per the company’s model, the customer essentially wrote the documents herself by answering several questions, while a computer created the documents based upon the answers. But the documents were flawed, the plaintiff claims, and those flaws cost the Estate severely.

LegalZoom is not the only company of its kind. It’s just the only one that uses a well-known attorney-founder as its spokesperson, lending security and credibility that some might claim is unjustified. The suit at hand will determine if LegalZoom in fact made misrepresentations, buried disclaimers and omitted relevant facts when courting customers through its advertising. It should be interesting to follow, and should at least serve as a cautionary tale for clients with real and often complex legal issues. Perhaps another adage may teach all of us a valuable lesson – you get what you pay for.

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Top Ten Reasons to Re-do Your Will

June 10, 2010 by fordmath

10. You lost your Will. – While it is not impossible to probate a lost Will in Texas, it is exponentially harder to accomplish than with a valid written will. I won’t go into all the gory details, but unless you can show exactly how it was lost, and exactly what it contained, you are in for a very uphill battle. A copy can get you part of the way, but it will not get you to the finish line. So stop looking for it, we both know you won’t find it, just go get yourself a new one.

9. You don’t like what your Will says. – Sort of obvious I know, but many people fail to realize that simply tearing up a Will and ignoring it will not always ensure that it does not find it’s way to probate court. (See #10 for an example.) Also crossing out provisions and penciling in new ones will not cut it. If you don’t like what the old one says, you must get a new one that revokes all former Wills.

8. You have moved states. – Probate laws vary from state to state so the Will you executed prior to moving to Texas may or may not be valid now that you are in God’s country. Don’t leave it to chance, get in and get a new Will.

7. You have aquired property that you want to leave to someone specific. – Did Christopher Walken recently visit you and hand you your great grandfather’s WWI watch? Again, we’ll skip the details but do you really want to ignore the, um, sacrifice that Mr. Walken made and not do something to ensure that watch goes to your son or grandson when you are gone? Do not trust that simply telling someone will get the job done. The only way to ensure it gets there is to put it in your Will as a specific bequest. Don’t rely on the fact that you will be able to have your own Pulp Fiction moment with junior as you pass down that uncomfortable hunk of metal. If that happens great, but you need a fall back plan in case you check out early. Put it in your Will.

6. You won the lottery. – Or inherited a ton of money. Or got a promotion. Or let’s just say you somehow “acquired” new found wealth (hey we’re not asking any questions). The point is you now need some tax planning and it’s more than likely that the Will you had when you were dirt poor won’t cut it. Why give more to the Government than absolutely necessary? Go get a new Will and make sure your new found wealth is not used to bail out any more billionaires.

5. You got a divorce. – Very few Wills are ambiguous when it comes to who is contemplated by the term “spouse.” If your Will was… well that may be why you got divorced in the first place, but I digress. If instead your Will lists your Ex by name, and you don’t want that person getting everything now that they left you heartbroken and penniless, get in and get a new Will. Don’t wait till you get remarried, you can always add that new spouse on later (or not, again we’re not here to judge you).

4. You have a new baby. – Congrats! If this is your first child then you really want to think about getting a Designation of Guardian drafted along with a Will now that you are parent. If this is not your first child, does your Will mention the other children by name? Does it divide your estate based on a percentage? Does it provide specific bequests to the kids? If so, you need an update. If this is a late-in-life addition to your family, you probably want to think about a trust since now you can’t guarantee you will be around to ensure they are fiscally sound through college. Just try and remember when you were 18, if someone had handed you even a modest share (say 30k) is there any doubt you would have been rolling around in a new Camaro? (Man I wish I still had that car… and that hair.)

3. Your Will is not Self-Proved. – Texas law makes it very, very simple to probate a Will, if you have a properly drafted Will. Just because a Will is valid does not mean it accomplishes everything to simplify probate. Don’t make your loved ones have to drag two people to Court to testify that you were of sound mind when you drafted your Will. Get up off the couch and go get a new Will drafted. And this time go to a real attorney, your brother-in-law does not count. (unless of course he’s a board certified estate planner).

2. Your Will does not provide for independent administration. – Just because your Will says “without bond” does NOT mean that you have appointed your executor to act independent of Court supervision. If your Will does not provide for independent administration your beneficiaries are going to be forced to either jump through hoops to avoid a dependent administration or else be stuck with a much more costly and time consuming dependent administration of your estate. Why would you do that to them when a new Will is just a phone call away? Seriously, give me one good reason. You’re better than that.

1. You don’t have a Will to re-do. God forbid, but if you still don’t have a valid written Will, get yourself to your nearest probate attorney and get it drafted. Do not pass Go, do not collect $200, just do it. NOW!

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‘Easy Rider’ Estate is in for a Bumpy Road

June 2, 2010 by fordmath

I am not usually one to fall into following tabloid or celebrity news, but a couple of stories from the past few days recently caught my eye and seemed appropriate to at least mention here. No, I won’t plug the paparazzi-style website that piqued my interest, but if you follow traditional news, you know that actor / film maker Dennis Hopper passed away last Saturday, after his battle with prostate cancer. Hopper was married five times over his life. The last one might really cost him.

Hopper and his fifth wife were in the process of divorcing one another. He filed in January of this year. Under a prenuptial agreement, Victoria Duffy would receive 25% of Hopper’s Estate, and $250,000 in life insurance proceeds. As a catch, the two had to be married and living together when he died.

That last part’s the trick. Over the last several months, various court rulings resulted in Duffy residing at Hopper’s property, but in a completely separate house. In fact, Duffy was previously ordered to remain at least 10 feet away from Hopper. Nonetheless, the wheels of justice turn slowly, and the two remained married when Hopper passed away, so Duffy is halfway home to a large payout.

Interestingly enough, the stories say that Duffy is not challenging Hopper’s Will. She’s just trying to make sure that her deal under the prenup stands. One of Hopper’s children seems set on making sure that never happens.

So the fight, and there will likely be a big one, now moves from the divorce court to the probate court. Whatever becomes of Hopper’s Estate will demonstrate that court’s application of laws related to prenuptial agreements, contracts and probate. And the results may well prompt other not-so-celebrity types to fully evaluate their own estate plans. We may not all be Hollywood A-listers, but whether the estate is $40,000 or $40 million, the stakes are high enough to engage in smart planning.

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This Week in Probate and Guardianship Appeals

May 10, 2010 by fordmath

Conte v. Louis M. Ditta, Guardian of the Estate of Doris L. Conte, First Court of Appeals Houston

This week’s entry comes to us from the 1st District Court of Appeals in Houston. Louis Ditta, acting in his capacity as the guardian of the estate of Doris L. Conte, an incapacitated person, filed suit seeking the removal of appellant, Susan C. Conte, as trustee of the Conte Family Trust. After a bench trial, the probate court ruled in Ditta’s favor and issued two orders. The first order removed Susan as trustee, and the second order modified the terms of the Conte Family Trust and appointed a successor trustee. Susan Conte appealed the trial court’s ruling removing her as trustee and appointing a successor trustee.

Background

In 1987, Joseph and Doris Conte created the Joseph P. Conte Family Trust, an inter vivos trust that became irrevocable on the earlier of Joseph or Doris’s death. The Trust agreement named Joseph the original trustee. Upon his death in 1993, per the terms of the trust, Doris began serving as co-trustee along with her two children, Susan and Joseph, Jr.

While things started out well, eventually it came to light that Joseph, Jr. was not administering the trust properly, and Susan began litigation to remove him as co-trustee. During the course of this litigation Doris was declared to be incapacitated and Louis Ditta was appointed as her guardian.

In 1998, Ditta sought the appointment of a receiver to take over the Trust in light of the continuing discord between Joseph, Jr. and Susan. Instead of appointing a receiver, the probate court entered an agreed order appointing a temporary successor trustee. The successor trustee filed an accounting and it revealed that both Susan and Joseph, Jr. had become significantly indebted to the Trust by using Trust assets for personal expenses. Ditta then sought the removal of both Susan and Joseph, Jr. as Trustees.

Following a bench trial, the probate court removed Susan as trustee, modified the terms of the trust regarding trustee succession, and appointed Frost Bank as successor trustee. The modification was in light of an agreement by Susan and Joseph, Jr. to reappoint Susan as trustee if she were removed by the court in the removal proceeding initiated by Ditta. This appeal followed.

Susan appealed stating that there was no evidence upon which to base her removal. Unfortunately for Susan, there was plenty of evidence of her being indebted to the Trust, and as such, removal was deemed to be within the discretion of the trial court.

However, in her second point, Susan argued that the trial court erred in appointing the successor trustee. Susan stated that the Court could not deviate from the terms of the trust when it came to appointing a successor trustee. The Court of Appeals agreed.

The Court of Appeals stated that the Texas Trust Code requires that on the removal of a sole trustee, a successor trustee must be appointed by the court in accordance with the terms of the trust. In this case, the trust provided that if neither Joseph Conte, Sr. nor Doris Conte appointed a successor in the first sixty days after the position of trustee was vacated, the majority of adult beneficiaries had a thirty-day window to appoint a successor. The Court noted that this showed a clear intent by the grantor to leave decisions regarding the management of the trust to his wife and children. While Susan was disqualified from being reappointed, her ability to pick a successor (other than herself) should not be modified. The Court remanded the case to the trial court to rule accordingly.

What does all of this mean for you? First of all, if you have a trust, make sure it says exactly what you want it to say. Secondly, if you are a beneficiary of a trust and have concerns regarding the Trustee, call us today and schedule an appointment to discuss your matter. Even where a Judge has ruled against you there may still be options available, but the timelines are short so do not put off calling an attorney that is qualified in probate matters.

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Medical Research and the Ultimate Gift

May 5, 2010 by fordmath

In my experience, I have drafted Wills and other estate planning documents in literally all shapes and sizes. Many clients take a very traditional approach, leaving their estates to their surviving spouse, then to children, and so forth. Others take a less traditional approach, making specific gifts for the care of animal companions, philanthropic organizations or churches. On occasion, a client will ask me how to make arrangements for what I consider the “ultimate gift,” the donation of their body to the advancement of science.

While I could probably spend an entire entry waxing on the state of cryonics, Ted Williams and the likelihood of reviving a deceased (and frozen) loved one with future medical technology, I thought a more practical discussion of current medical donation opportunities might be more appropriate. Many Texans are already organ donors, and so the concept of donating an entire body to science is gaining the approval of some clients who desire for even their remains to provide some kind of legacy.

UT Southwestern Medical Center, as well as the Texas A&M Health Science Center, provide some excellent information related to body donation. Both require the completion of some very basic forms which are, of course, revocable. Each institution also outlines the procedure that occurs upon the death of the donee, as well as the requirements that must be met before a body is accepted. While the advice of an estate planning attorney should be sought in connection with the gift, it is not necessarily needed in all cases.

The body must be suitable for scientific or educational research. That is, it cannot be embalmed, and an excessive amount of time after death cannot have passed. Certain conditions, such as trauma or contagious diseases may also prevent acceptance. Generally speaking, the institutions retain the body for two years depending upon their needs. At the conclusion of the institution’s use, the body is cremated. The remains are either returned to the family for a nominal fee, or disposed of appropriately by the institution.

Of the clients that I’ve counseled concerning these matters, I typically tell them to insert the gift into their Will, but to take the steps now to ensure that it can be fulfilled. Practically speaking, it may be weeks or months after death before a Will is admitted or even discovered, negating any chance of fulfilling the donation. Moreover, your loved ones should be aware of your plans as soon as you make them, so that they can take the appropriate steps to see your donation through in a timely manner.

Much of what we plan for involves things and money – the tangible parts of our lives that we realize we cannot take with us. With some foresight and a small amount of planning, you can make a gift that some might argue has a bit nobler intentions – one that will benefit the advancement of medical and scientific learning.

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2010 Estate Tax Anomaly

April 27, 2010 by fordmath

In June 2001, I wrote an article for the Houston Chronicle in which I detailed the new tax law changes that had been put into effect that would completely eliminate the estate tax in 2010. At the time, I posed the question, “Is the repeal of the estate tax a myth or a miracle?” As we sit here in April 2010, I’m not sure that anyone knows the answer any better today than we did 9 years ago.

Under the 2001 legislation, the estate tax exemption (the amount a person would leave to their family free of estate tax upon their death) was set to increase from $1 million in 2001 to $3.5 million in 2009. Additionally, the tax would be completely abated in 2010 (so that no one dying in 2010 would pay taxes as a result of their deaths), and then in 2011, the estate tax exemption would return to the $1 million level that had existed in 2001.

As the recession hit the U.S. in full force in 2009, members of Congress and the President have continually discussed the option of re-instituting the estate tax for 2010 and making it retroactively effective to estates of anyone who died in 2010, even if they died prior to the enactment of the new law. The March 28, 2010, death of Houston Billionaire Dan Duncan has created intense buzz about these issues because the death of someone like Duncan in the one tax-free year in decades means that the U.S. Treasury will miss out on potentially billions of dollars of tax revenue which it might have ordinarily received as a result of Duncan’s death.

Although very few estates are as large as Duncan’s, the 2010 quandary has the potential to affect a vast number of people dying in 2010. If Congress re-institutes the tax for this year, then it will necessarily include a cap on the amount of money that someone could leave to their family members tax free. At Ford & Mathiason, we had 2 clients die in just the first two weeks of January, 2010, who will potentially be affected by these changes. In our first meeting with their families after their deaths, we had no option but to tell them to just “hang on and see what Congress does by the end of the year.” Until Congress makes a decision about the estate tax issues, we will not know how to advise our clients.

Regardless of how the estate tax issues play out this year, 2010 will go down in the history books as an interesting year from an estate tax perspective. It is the first year in decades in which there could be no estate tax, but by the end of the year, that may be changed completely and will cost some taxpayers considerable amounts of money.

Stay tuned to see what happens!

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This Week in Probate and Guardianship Appeals

April 9, 2010 by fordmath

Doherty v. JPMorgan Chase Bank, First Court of Appeals Houston

This week’s entry comes to us from the 1st District Court of Appeals in Houston. Lois Doherty appealed the order of Mike Wood, Judge of Harris County Probate Court Number Two, who granted JPMorgan’s motion for summary judgment.

Background

Mrs. Doherty is the beneficiary of the Lois Doherty Trust, created by her late husband Wilfred T. Doherty in his Will. JPMorgan is the trustee of this Trust. Paragraph 3.3 of the Trust states that the Trustee must distribute such amounts of Trust principal as Mrs. Doherty may request to provide for her comfort, health, support or maintenance. In 2005, Mrs. Doherty suffered a stroke that left her physically impaired and she moved into her daughter’s home. This house lacked a handicap-accessible bathroom and therefore Mrs. Doherty requested funds to modify the bathroom in her daughter’s home. Mrs. Doherty requested that all of the funds in the trust be released and placed into another account that she owned.

The bank decided that they did not agree with this request and instead asked her to send them quotes for the repairs to the bathroom and they would review such quotes and make the distribution. Obviously this did not sit well with Mrs. Doherty. She therefore hired an attorney and requested that JPMorgan resign as trustee. JPMorgan refused to resign and instead requested a full judicial release. They then denied the request for funds to install a handicap accessible bathroom and continued to hold the funds.

Mrs. Doherty filed a petition for declaratory judgment seeking a declaration that in light of JPMorgan’s refusal to act, the Will allowed her to appoint a successor trustee. Both Parties then filed motions for summary judgment. Mrs. Doherty’s motion sought summary judgment on the issue that JPMorgan had refused to act under the mandatory terms of the trust and such an act entitled Mrs. Doherty to appoint a successor. JPMorgan’s motion sought summary judgment on the issue that it had not failed to act under the terms of the trust and that all of Doherty’s claims were invalid. Even though JPMorgan expressly denied Mrs. Doherty’s request for funds under a mandatory provision of the Trust, Judge Wood found in favor of the bank and granted its request for summary judgment.

The Court of Appeals reviewed the terms of the trust, acknowledged that the provisions under Paragraph 3.3 required mandatory distribution when requested for maintenance, and therefore ruled that JPMorgan had in fact refused to act under the terms of the trust. This meant that Mrs. Doherty was well within her rights to appoint a successor trustee and JPMorgan was not entitled to summary judgment. The Court reversed Judge Wood’s ruling and rendered judgment in favor of Mrs. Doherty on her declaratory judgment claim.

What does all of this mean for you? First of all, if you have a trust, make sure it says exactly what you want it to say. Secondly, if you are a beneficiary of a trust and have concerns regarding the Trustee, call us today and schedule an appointment to discuss your matter. Even where a Judge has ruled against you there may still be options available, but the timelines are short so do not put off calling an attorney that is qualified in probate matters.

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Five Things to Consider When Planning to Write your Will

March 30, 2010 by fordmath

1. Who Should Receive the Estate?

For some, the passage of property equally to their descendants is the norm. However, each family dynamic is different, and your estate plan should reflect the same standards and ideals that you act on today. Many clients like to include friends, charities and other organizations that they deem important and deserving. In the absence of a Will, your heirs will receive your Estate under a system designed by the legislature. A well-drafted Will is not so rigid, and can be tailored to fit your wishes precisely.

2. Who Will Manage the Estate?

With a well-drafted Will, the person of your choosing can administer your Estate largely free of supervision by a Court. They will gather up the assets of your Estate, pay any proper debts and distribute the remainder to your beneficiaries. When selecting the person to fill this role, it is wise to consider their age, ability to handle professional matters and their relationship to you and the beneficiaries that they will ultimately have to deal with. Their position is one of trust and confidence, and the task of picking the right person is as important as the tasks that they will be asked to carry out.

3. What if the Beneficiaries are Young or Incapacitated?

Estate planning focuses on contingencies – the “what ifs” of life. Some are more likely than others. What if my spouse dies before I do? What if our children are minors when I die? Good planning can provide good answers. Your Will might include provisions that nominate guardians for minor children. It might include trust provisions to ensure that property received by a minor is held and used for their benefit until they reach a specified age. Rarely can a contingency not be planned for when a well-counseled client sits down to execute an estate plan.

4. What Happens to the Non-Probate Assets?

Many of the largest assets in an Estate are not even technically part of the Estate. They pass to designated beneficiaries pursuant to an agreement with a life insurance company or a retirement plan administrator. The best estate plans harmonize these probate and non-probate assets. For example, where one child is provided for significantly by a life insurance policy, the Will may balance things out by favoring the other child a bit more with other assets. Many clients fail to update their beneficiary designations when they sit down to revise their Wills, but the decisions made in regard to these documents are as important as those that you will make when creating your Will.

5. What if the Beneficiaries are Unhappy with my Choices?

Estate disputes happen. In most cases that I have encountered, the seeds of Will Contests and beneficiary fights are sown long before the testator even dies. Clients know their families better than a lawyer, and some frank and open family discussions may avert situations like this. But well-drafted Wills typically go a step further to include provisions that discourage fighting among beneficiaries, just in case. Your estate plan should please you, and it should be executed in a manner that best protects the decisions that you have made concerning your legacy.

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Estate Planning Conversations

March 8, 2010 by fordmath

For a lot of people, death and their own fragile mortality is the last thing that they want to discuss with anyone – let alone loved ones. We know that we are not going to live forever, but pondering our inevitable demise can steal the sun right out of the day, and so we tend to focus on happier things. For the same reason, parents and children sometimes tend to avoid openly discussing Wills, Trusts and all of that legal business that will be left when someone dies.

Yesterday’s New York Times included a great article about those challenging conversations, and the benefit of having them well in advance. The centerpiece of the story is a lawyer in Seattle. He has two children and has been separated from his wife, but not divorced, for around 30 years. He also has a brain cancer, and did not have a Will. In his state, had he died without a Will, his estate would have passed to his wife. He wanted to avoid this and opened up candidly with one of his daughters, who learned of his intentions and helped him find a lawyer to put his plan down on paper.

It’s a nice story and yes, it’s good to know that you can open up to your children to discuss your estate planning. Many of our clients take the same path of least resistance. I’ve drafted countless Wills that leave a client’s estate to the surviving spouse and then equally to the children. But occasionally, depending on the facts, things get changed up. Perhaps the spouse only gets a lifetime interest in the home, and the children inherit everything else, except for the child who receives nothing. Neither the spouse nor the children have any idea about the client’s plan until the client dies and the Will surfaces. Talk about awkward.

Undoubtedly, the client had a perfect reason for putting that plan into effect. It all made sense and the principles behind the decisions were sound. But the principles and reasons were kept by the client. The client never sat down with the spouse or children to share. So the spouse sues – the prodigal child sues – everyone sues because nobody’s happy about that Will. Twelve months and tens of thousands of dollars later, the suits are settled.

I’m not willing to bet that a conversation between the client, the spouse and the kids could have avoided all of that, but it probably couldn’t hurt. So much litigation in our area stems from resentment and the fact that a spouse or child is treated differently in the client’s Will than someone else. The Times article includes the thoughts of some experts, who believe that a series of conversations about these kinds of delicate issues works best. I agree.

Sadly, if a family has some inner turmoil ahead of the client dying, you can usually expect that turmoil to break loose after the fact. I tend to believe that litigation is unavoidable in some cases. But the Times article does make an excellent point for those situations where all it takes is a few conversations with your loved ones to openly discuss your plans.

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